Baseboard Heater Depreciation Schedule?

Question

The life expectancy of electric baseboard heaters is about 10-15 years, but according to the IRS Depreciation schedule, would electric baseboard heaters qualify as a "furnace" and have to be depreciated over 27.5 years?

I have a property that is entirely heated by eletric baseboard heat, and was wondering what class of deprication I need to put these heaters into.

Scott Bartlett · Answer

Anyone?

I've been reading that Kitchen Cabinets can be depreciated over a 5 year schedule, unless it is part of a MAJOR kitchen renovation?

All of these improvements have been done BEFORE the property was placed into service, as an effort to get the property into rentable condition.

Account Closed · Answer

Dont they cost like a hundred bucks? I changed one in one off my houses and just taking it as a maintenance cost. Who wants to depreciate 5 bucks per year!

Scott Bartlett · Answer

Anish Tolia ,

While your right, they don't cost much, usually $40 to $80 depending on the size, but these costs were incurred BEFORE the property was placed into service, and the baseboard heaters and thermostats ended up around $450.

So, according to the IRS, it must be added to the cost basis of the property, which is fine, but at what depreciation schedule?

David Beard · Answer

Well, don't be penny wise and pound foolish, for starters.  If you take an aggressive stance on writing off things (versus capitalizing/depreciating), then you will potentially make it more difficult to obtain bank financing in the future.

You don't depreciate anything prior to placing the property in service, if that's what you're asking.  Your rehab expenses become part of the cost basis, with depreciating beginning when the property is available for rental and you are actively seeking a tenant.

There are specific guidelines regarding rehab work that is done during a rehab phase.  Even though individual items of work might be repairs ordinarily, if done as part of an overall rehab project during a short period of time, the IRS will likely view all of the work as depreciable, unless you very carefully document things and use separate contractors, etc.  All of this kind of thing is outlined in the books.

I don't know anything about Reed's book.  I don't believe he's a trained tax pro, is he?  I thought he was a real estate investor/author.  Not discounting his advice, but I consider the two books I mentioned pretty authoritative on this stuff, written by attorneys and tax pro's.

Scott Bartlett · Answer

Any thoughts on John T. Reed's book on tax avoidance?

What I am looking for is how to properly expense and depreciate repairs, and a clear list of items that a landlord would expect to purchase and depreciate while in service and before service.

David Beard · Answer

I think you're fine throwing baseboard heaters into 5-year personal property if you like, for such a small amount, don't sweat it.  They're arguably not "attached" enough to the structure to mandate 27.5 year treatment.

As far as tax books, the better books in my opinion are:

Nolo's Every Landlord's Tax Deduction Guide

Lasser's Real Estate Investor's Tax Edge

They DO have specific lists of 5 year (appliances, window A/C, carpeting and floating flooring NOT glued/cemented/nailed, drapes/blinds, and 15 year property (shrubbery/landscaping, fences, sidewalks, driveways, parking areas, etc.)

Scott Bartlett · Answer

I've looked it up and plan on purchasing the book. Does it help list what can be depreciated vs expensed and etc?

Bryan L. · Answer

@Scott Bartlett - I've done similar things with my depreciation in the past.  But you have to also consider the extra cost to have your account do this, plus the extra time on your part to separate it all out.  Is it worth it?  Run some numbers to see.  On a small house it may not be worth the extra work.  On an apartment complex where you can come up with a typical amount per unit and then multiply by several units, then maybe yes.  John T. Reed's book on taxes is excellent and I think it costs less than $50.

Scott Bartlett · Answer

Steve,

I've been separating costs according to the receipts I have. Everything that I consider "permanent" such as lumber, drywall, screws and etc into the cost basis at 27.5 years.

But for things such as laminate flooring, kitchen cabinets and etc, I've been adding those costs to a 5 year group.

Steve Babiak · Answer

Are you doing cost segregation?  If not, then it is just lumped in usually.

Baseboard Heater Depreciation Schedule?

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